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It finally happened. You’re out of work, and your wife needs surgery. You don’t have health insurance, money for next month’s rent or money to pay the minimum balances on your overloaded credit cards. You’ve finally hit bottom.

When life deals you a lousy hand, what do you do? Maybe you pound the pavement until you find a job that lets you go after those debts like a barracuda after bait fish. Maybe you go to
consumer credit counseling and slowly but surely pay down the loan balances.?Maybe you file for bankruptcy.

But there are no maybes about this: You will end up with a nasty credit report that dangles like an albatross around your neck every time you turn your head. You apply for a mortgage and you’re turned down.?You try to get a credit card or a lower interest rate and you’re turned down again.?You look like a deadbeat on paper, and you know you’re not.

If only you could get a new identity or find a big eraser.

The big eraser

Congratulations! You’re a perfect candidate for the pitchman who will offer to help you fix your credit report. He may even call it a credit repair kit.

Whatever it’s called, the pitchman knows he’ll catch your attention with the promise of a big eraser to rid your credit report of negative marks, so he casts this sort of bait:

The bait

Why let charge-offs, judgments, repossessions, etc. be on your credit report when there are new laws in the Fair Credit Reporting Act?

You don’t have to live with bad credit!

Have you filed a bankruptcy, lost a home or had a vehicle repossessed?

Is there information on your credit report that is damaging to you as a credit consumer, making it difficult if not impossible to gain new positive credit?

Now you have the power to correct your credit.

It’s pretty tempting, isn’t it? The pitch sounded good, so Bankrate.com slapped down its 50 bucks and downloaded the repair kit. Look at the claims vs. the disclaimer and introduction that came with the material we ordered:

Advertisement

Disclaimer

70 percent of all credit files contain errors.

There’s a 48 percent chance of having a questionable item on your credit report.

Produced by a top credit attorney who charges hundreds, even thousands of dollars to perform these services.

Not intended to be a substitute for services of professional, legal, accounting or other specialized help.

Any information contained on the credit profile is subject to removal under the sub-sections of the federally mandated credit reporting laws.

Disputing accurate credit information would place the individual at risk of violating federal and/or state laws.

A simple and effective system for removing items such as bankruptcy, tax liens, repossessions, foreclosures, charged-off accounts, collection accounts and most importantly, erroneous information.

This system is intended for use only in disputing inaccurate credit information and expressly should not be used to remove accurate credit information.

New identity crisis

If you’re trying to escape the shadow of your past credit mistakes, some pitchmen may even offer to help you establish a new identity for a fee — paid upfront, of course.

Here are some of the claims that a pitchman might toss you and how they measure up to reality:

The pitch

What it means

Reality check

You can have a new Social Security number and a brand new identity.

You can file aForm SS-4 with the Internal Revenue Service and get a new 9-digit identification number called a federal employer identification number (FEIN).

It is a federal crime to get a FEIN under false pretenses.?

There is no law against having two identities.

It’s legal if you have two separate entities –? yourself (your Social Security number) and your business (your FEIN).

Using two identification numbers to identify one entity — that is you — is called “file segregation” and is illegal.

The seller of this information will not be held legally responsible for how the purchaser might choose to use it.

It is illegal to use the seller’s information to establish a new identity.

You could go to jail.

How to repair mistakes on your credit report

There’s no magic eraser that can get black marks off your credit report when you’re guilty as charged.?

If, however, you’re not guilty and the black mark is a mistake, the Fair Credit Reporting Act says the reporting company has to take it off your credit report. If there’s a dispute over the item and the reporting agency refuses to remove it, it has to let you include your side of the story on the report. What the program above is actually selling is help in the “often tedious process” of challenging errors on your credit report.

The process is tedious all right, with or without a $50 program. There is plenty of free help on the Web if you need to correct errors on your credit report.

What if the black marks are no mistake? How do you live with a blemished credit report?

It’s a temporary thing, like a broken leg, and you do whatever you can to make it better as quickly as possible. Your credit history may whisper “bad risk” to a potential lender, but your current actions will eventually reduce that whisper to a whimper.

Live within your means, pay your bills early, start saving and keep trying to
find lower interest rates for your credit card debt (real lower rates, not teaser rates). Don’t count on winning the lottery, and don’t expect to find a viable way to borrow yourself out of debt.

Do the right thing one day at a time, and before you know it you’ll be handing that albatross right back to the Ancient Mariner.

Editor’s note: Samuel Coleridge’s poem,The Rime of the Ancient Mariner, deals with the belief that killing an albatross brings bad luck. When a sailor kills one and his ship runs into trouble, his shipmates make him wear the dead bird around his neck. We’re not sure how it affected his ability to get a loan.

DOROTHY ROSEN has a master’s degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.

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